B2B Logistics: The Mechanisms That Make It All Work

Tsuyoshi Taira is CEO of Tazan International, which has investments in a number of Internet start-ups including AsiaLinks.com, a B2B market aimed at helping U.S. companies do business in Asia.

Q:

What is the future of e-commerce?
A: The B2B and B2C markets are based on small credit card purchases of commodities, but these markets are limited in the total value they support. People are willing to buy $100 items with credit cards but not $10,000 items. To make these markets efficient for large transactions, they must be able to move $100,000. B2B markets will need to move large amounts of transactions both dollar-wise and commodity-wise.

Q: How will B2B markets change the way business is done?
A: Transactions have been limited to a one-customer, one-vendor model, which is inefficient. Information technology allows companies to offer deals to many customers at the same time so people can shop from many suppliers and select from the lowest price. This will create convenience and simplicity, which helps drive the industry.

Q: What are the limitations of exchanges?
A: Exchanges provide only the initial search. Financial and logistical execution then needs to be supported. I call this an Internet trading company. This is the same as the trading companies that still exist in Japan. They handle big dollar transactions between companies and provide help on the financial and technical sides.

Q: Why did the old trading companies disappear in the United states?
A: They were third parties that increased overhead. U.S. companies stopped working with them to reduce the cost of transactions.

Q: Why is it the right time for trading companies to return?
A: When you are dealing with multiple parties in a relationship, you need someone to take care of the details; to support the financial side with credit and logistics.

Q: What are the financial functions of trading companies?
A: If I want to buy a million dollars worth of components, a trading company can place the order to the supplier, get credit from another company and deliver the results to me. To move millions of dollars, you need to rely on someone to execute the transaction.

Q: How do B2B exchanges differ between the United states and Asia?
A: The United states is moving into trading exchanges very rapidly while Japan has just not bought into it yet.

Q: Why are exchanges important to Asia now?
A: Asia has become the manufacturing center of the world. Lots of components come through Asia and the customers are overseas. If you rely on a direct channel, and you are short on a part or have excess inventory, you need someone to unload the excess or find the required parts.

Q: How will the growth of U.S. trading companies compare with Asia?
A: In Asia, trading companies are very well established. It will be easier for them to quickly support B2B activity. International trading companies with branches in different places like Taiwan, Singapore and Hong Kong can use their current infrastructure to take advantage of those markets. Here, we don't have many; we have to start from scratch.

Q: Do these markets raise antitrust concerns in Asia?
A: Asia is more diversified than the United states. There are no monopolies in manufacturing, and I don't think there will be. These exchanges will create a more competitive environment.

Q: What are the components required for B2B exchanges?
A: Software is needed to do transactions, and technology is needed to aggregate the data and parts. There has to be a way to check a company's credit. New B2B tools are coming that will enable these kinds of functions.

Q: What are your investing criteria?
A: When I invest in a company, it is mostly an investment in the people who can execute it and make it successful. At the same time, it has to be a good market area.

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